Fiscal decentralization, institutional quality, and government size: an asymmetry analysis for Asian economies

Abstract

This study aims to examine the asymmetric effects of fiscal decentralisation and institutional quality on government size for selected Asian economies. The study employs asymmetric autoregressive distributed lag (ARDL) methodology by using time series data ranging from the period 1984 to 2017. The results show that positive shocks in expenditures decentralisation (ED) enhance government size in Japan, Kazakhstan, Thailand, Turkey, and reduces it in Korea, Rep. in the long-run. While negative shock in ED reduces government size in Pakistan, Thailand, Turkey and increases it in Kazakhstan and Mongolia in the long-run. Whereas asymmetric results in the long-run show that a positive shock in revenue decentralisation (RD) increases government size in Pakistan, Japan, Kazakhstan, Thailand, and Turkey, and a negative shock in RD decreases government size in Pakistan, Mongolia, Thailand, and Turkey. Our asymmetric results of institutional quality are also country-specific.

Keywords:

• Fiscal decentralisation
• institutional quality
• government size
• NARDL
• Asian economies

Disclosure statement

The authors declare that they have no conflict of interest.

Data availability statement

The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request.

Additional information

Notes on contributors

Sidra Sohail

Sidra Sohail is a Ph.D candidate at Economics Department, Pakistan Institute of Development Economics, Islamabad, Pakistan. Her area of interest is in the field of public finance and fiscal policy. She has published extensively in reputed national and international journals.

Sana Ullah

Sana Ullah is a Ph.D candidate at School of Economics, Quaid-i-Azam University Islamabad, Pakistan. His area of interest is SMEs development, international economics, environmental economics, poverty reduction, inclusive growth, and governance. He also published widely on these topics in internationally respected peer-reviewed journals such as Eurasian Economic Review, Environmental Science and Pollution Research, and Small Business Economics.

Attiya Yasmin Javid

Attiya Yasmin Javid is a University Distinguished Professor Faculty of Economics at Pakistan Institute of Development Economics, Islamabad, Pakistan. She has published extensively in reputed national and international journals.